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August 2013
Introduction to Macroeconomics
Introduction to Macroeconomics
Road map:
The goods market: the IS curve
The financial market: LM curve
Equilibrium: IS-LM
Fiscal and monetary policies
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Supply of goods: Y
Equilibrium: Y = C (Yd) + I + G
Introduction to Macroeconomics
Introduction to Macroeconomics
(+,)
Introduction to Macroeconomics
Introduction to Macroeconomics
Equilibrium: Y = C (Y , T ) +I (Y , i) +G
| {z }
| {z }
(+,)
(+,)
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
M
P
= YL(i)
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
IS relation:
the supply of goods must be equal to the demand for goods
LM relation:
the supply of money must be equal to the demand for money
Introduction to Macroeconomics
Introduction to Macroeconomics
Fiscal policy:
Fiscal contraction (or fiscal consolidation): decrease in the
budget deficit G T
decrease in government spending
increase in taxes
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Monetary policy:
Monetary contraction (or monetary tightening): decrease
in the money supply
Monetary expansion: increase in the money supply
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Introduction to Macroeconomics
Conclusion
Introduction to Macroeconomics